It has been announced that 35 year mortgages can now be taken out by homeowners with Help to Buy properties.
A loophole has been closed following a move by the government which saw Help to Buy property buyers facing difficulties and uncertainty if they wanted to take out a mortgage with a term of more than 25 years.
The changes have been introduced with immediate effect and will allow borrowers to spread their payments over a longer period, reducing the size of their monthly bills.
With the number of first time buyers opting for mortgages spread over 30 years or more doubling over the last decade, the government has sought to ensure that the wider mortgage market reflects consumer behaviour.
Currently, Help to Buy homeowners aren’t able to take out a mortgage plan that extends beyond 25 years after the original date of purchase when remortgaging following the end of a fixed rate period of two or five years.
Now, the Help to Buy remortgage market has been opened up to more lenders and promotes choice, potentially paving the way to more competitive deals.
‘We are determined to open up the dream of home ownership to the next generation and our Help to Buy schemes have already been used more than 500,000 times by families to get a leg up onto the property ladder,’ said Housing Minister Esther McVey.
‘I want our Help to Buy scheme to work for home owners so we are giving people the freedom and flexibility to take out longer mortgages, if it suits their needs,’ she added.
Will German, director of Help to Buy at Homes England, explained that he had been contacted by lenders to say that their ability to confidently offer remortgage products to Help to Buy customers hinged on the agreement to match or extend equity loans to the main mortgage loan term.
‘Under our new policy, if the customers’ remortgage runs for longer than the standard 25-year Help to Buy Equity Loan term, then we will automatically extend ours. This move opens up the Help to Buy remortgage market to more lenders. It offers more choice, more options and better outcomes for these customers,’ he said.
Trade Association UK Finance worked alongside Homes England on developing this new policy. ‘We are pleased to have worked alongside Homes England, providing feedback and helping to ensure this new policy is ready for implementation,’ said Jackie Bennett, director of Mortgages at UK Finance.
‘The new changes provide certainty for lenders and should also attract new entrants to the market, providing greater choice for customers who are looking to remortgage under the Help to Buy Scheme,’ she pointed out.
‘This is a great example of public and private sector engagement and we look forward to continuing to work closely with Homes England in the months ahead,’ she added.